After State Lawsuit Losing Streak, Kalshi Nabs Victory in Tennessee—This Could Be Why
Decrypt
by Sander LutzFebruary 20, 2026
AI-Generated Deep Dive Summary
Kalshi recently scored a legal victory in Tennessee when a federal judge granted a preliminary injunction against state regulators, allowing its sports-related prediction markets to operate under federal jurisdiction. However, this win contrasts sharply with recent rulings in Nevada, Maryland, and Massachusetts, where courts ruled in favor of state regulators, often using narrower "swaps" arguments to assert jurisdiction over such markets. Legal experts suggest that the key difference lies in the states' legal strategies: those relying on broader congressional intent arguments have generally succeeded, while those focusing on technical definitions like "swaps" have faltered.
Daniel Wallach, a legal expert specializing in prediction markets, explained that states using outside counsel to argue Congress never intended to grant the CFTC authority over sports wagers have been more effective. In contrast, Tennessee and New Jersey, which used in-house counsel and focused on narrower legal definitions, struggled to make their case. This strategic divide highlights how resource allocation and legal expertise play a significant role in shaping outcomes.
The split rulings underscore the growing regulatory uncertainty surrounding prediction markets. While Kalshi's argument hinges on interpreting sports wagers as "event contracts" under federal law, states like Nevada have taken a different approach by temporarily banning Kalshi's platforms pending trial. This discrepancy has left the legal landscape fragmented, with conflicting interpretations from various courts.
As the issue escalates, it is increasingly likely that the Supreme Court will need to settle the matter. The outcome could have significant implications for the crypto and Web3 industries, particularly prediction markets. If states prevail in asserting jurisdiction, it could lead to stricter regulation or even bans on such platforms. Conversely, a ruling in favor of federal oversight could open pathways for innovation in decentralized financial instruments.
Ultimately, this legal battle is not just about sports betting but broader questions of regulatory authority over emerging digital assets and marketplaces. The stakes are high, as the resolution will shape the future of prediction markets and set precedents for how similar technologies are regulated across the U.S.
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Originally published on Decrypt on 2/20/2026